The central bank kept its deposit rate unchanged at negative 0.1 percent, but introduced a new policy of targeting the yield curve. While the central bank abandoned its monetary base target, the BOJ said it would maintain its program of buying long-term Japanese government bonds (JGBs) so that the balance of its holdings increases by 80 trillion yen ($781 billion) annually.

The Nikkei 225 closed higher by 315.47 points, or 1.91 percent, to 16,807.62, up from a modest level of 0.3 percent gain before the decision. The Topix index rose 35.70 points, or 2.71 percent, to 1,352.67.

Asia market close

In the currency market, the Japanese yen slipped as much as 102.78 against the dollar after the announcement, compared to an earlier high of 101.09 against the greenback.

Japanese government bond yields briefly rose following the decision. The bid yield on the 10-year JGB turned positive to 0.002 percent before retreating to negative 0.025 percent. The bid yield on the 30-year JGB climbed to 0.532 percent, before retreating to 0.519 percent in the afternoon.

Japanese banking shares closed sharply higher, following the BOJ's decision to keep interest rates on hold - negative interest rates usually tend to eat into the profit margins of banks.

South Korea's Kospi index closed up 10.28 points, or 0.51 percent, to 2,035.99. In Hong Kong, the Hang Seng index rose 0.74 percent in late afternoon trade. Chinese mainland markets moved little, with the Shanghai composite closing near flat at 3,025.48, while the Shenzhen composite gained 5.5 points, or 0.27 percent, to 2,005.59.

Initial reactions from analysts suggested they were somewhat disappointed by the BOJ's decision.

Bank of Japan poll

JPMorgan's Masaaki Kanno said in a note the policy announcement suggested the central bank was "not so serious" about achieving its 2 percent inflation target as early as possible. If the central bank was serious about reaching the target sooner than later, Kanno said the BOJ "could have eased today, including the rate cut."

"The BOJ appears to be more worried about the limits of the tools and the negative impact of the negative interest rate policy, although the Bank will never accept this, at least officially," Kanno added.

Wednesday's announcement from the central bank, however, likely offset slight dent in sentiment seen in the morning session after data from Japan's Ministry of Finance, released before the market open, showed exports fell 9.6 percent on-year in August, sharply lower than the 4.8 percent drop economists expected in a Reuters poll.

Imports dropped 17.3 percent in August, slightly less than a Reuters median estimate for a 17.8 percent decline.

In the currency market, the dollar index, which measures the greenback against a basket of currencies, climbed to 96.151 as of 3:11 p.m. HK/SIN, following the BOJ's policy decision. It was up from levels near 95.634 on Tuesday afternoon Asia time.

The dollar would be closely watched throughout the global day as a monetary policy decision was also due from the Federal Reserve in the U.S. on Wednesday, though market watchers largely do not expect a rate hike.

Oil prices advanced on Wednesday, with U.S. crude gaining 2.09 percent to $44.97 a barrel as of 3:11 p.m. HK/SIN, while Brent added 1.55 percent to $46.59.

The uptick in oil followed stateside data from the American Petroleum Institute that showed a 7.5 million barrel drawdown in U.S. crude inventories for the week ended September 16, according to Reuters.